It's a simple enough question and one every bookie gets asked. How do we set the odds on Inter not losing at home again or Wigan sneaking victory over title-chasing Arsenal. Well it goes a little like this.
There are a team of people employed by any bookmaker, usually referred to as Traders, Risk Analysts or Odds Compilers. Their job is to produce odds that closely represent the chance of an occurrence.
It’s a tough job to account for all the variables in any event. If you take the chance of Manchester United winning at home for example the trader has to account for the form of the teams, injuries to key players, influence of the crowd, the referee and many others.
Happy Home | Red Devils are usually a safe bet
In addition to the chances of a team winning, they have to account for the money that is likely to be placed. In the Manchester United example, most people would back the Red Devils to to win at Old Trafford and therefore the odds will be shorter than perhaps the precise chances of victory.
Also like any other business a bookmaker has to make money so the Trader will add a small percentage to a ‘book’ in order to generate this profit. In a match between two evenly matched teams on a neutral ground the odds might look something like the following:
|7/4 (2.75)||Team A||36.36% chance of winning|
|13/5 (3.60)||Draw||27.7% chance of winning|
|7/4 (2.75)||Team B||36.36% chance of winning|
This adds to approximately 100% and trading books like this, the bookmaker should break even over a period of time. So what they have to do is skew the odds slightly in their favour:
|6/4 (2.50)||Team A||40% chance of winning|
|12/5 (3.40)||Draw||29.4% chance of winning|
|6/4 (2.50)||Team B||40% chance of winning|
Now the bookmaker has a 9.4% profit margin and should make a profit over time although to the punter of course it’s all about making a profit on the game itself! A bookmaker will trade a market at anywhere between 101 and 120% profit depending on the market and competitor activity.
That means that in a perfect world (which doesn’t exist) the bookmaker should make between £1 and £20 for every £100 that are gambled on the market. What happens in reality however is that most money is gambled on the favourites and it’s when the favourites fail to win, that the bookmakers make their money.
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